A news release from consultant Presidio Pay Advisors about a study of 115 banks receiving $11.9 billion from the federalTroubled Asset Relief Program (TARP)said changes in pay were effectively random, with no measurable link to changes in performance for the group as a whole. Presidio said absolute levels of executive compensation dropped at many banks.
Even though more than 90% of banks turned in negative shareholder returns in the last three years, Presidio said 20% of the CEOs during this period got a bump in their 2008 total cash compensation which ranged up to 108% over 2006 levels.
The survey also found that 37% of CFOs studied received increases in 2008 total cash compensation of 2% to 76% compared to 2006. An even greater percentage (43%) of CFOs received increases in 2008 total direct compensation of 2% to 420% over the same period.
“There seems to be a disconnect between stated performance philosophies and pay decisions,” said Dave Bisson, a senior consultant at Presidio Pay Advisors, in the news release. “As performance deteriorated in 2007 and 2008, many compensation committees reset performance targets, paid discretionary bonuses, excluded unusual or one-time charges from bonus calculations, or increased long-term incentive grants for retention purposes. These actions are inconsistent with paying for performance.”
The study also found compensation committees approved increases in the size of equity grants to offset lower stock prices:
- Total stock options granted to CEOs increased from 6.5 million in 2006 to 11.1 million in 2008, more than offsetting a drop in restricted stock grants from 2.6 million shares to 1.8 million over the same period.
- Total stock options granted to CFOs increased from 2.2 million in 2006 to 3.5 million in 2008, combined with an increase in restricted stock grants.
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